Restrictions, Tariffs – Trump’s return poses a risk to economic forecasts

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Donald Trump’s return to the White House poses a risk to the International Monetary Fund’s (IMF) economic forecasts. It does not yet include its policy proposals such as trade restrictions and tariffs.

It is conceivable that inflation in the US will rise, says Pierre-Olivier Gourinchas, chief economist at the IMF. According to the latest forecast, economic growth in the US will increase by 0.5 percentage points to 2.7 percent this year. Worldwide, the IMF assumes 3.3 percent.

Major US banks are currently relying on softer regulation under Trump. They hope that several capital rules will be revised. These include reduced capital premiums for global banking groups and a review of supervisory stress tests.

Banks consider regulations excessive
In the years following the 2008 financial crisis, capital requirements for banks were tightened. Major US banks such as JP Morgan, Bank of America and Goldman Sachs are being asked to hold a combined $1 trillion to cover potential credit and trading losses. They believe that the regulations are excessive and poorly balanced.

U.S. bank executives say financial institutions largely agree that it would be better if a weaker set of rules were implemented under the Trump administration rather than regulators suspending the project. Because then there is a risk that a future democratic government will introduce stricter rules.

Source: Krone

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